Slides of my lecture on digital exhaustion under EU copyright law, held at Bocconi University on 5 May 2017

1. Università Commerciale ‘Luigi Bocconi’
Milan, 5 May 2017
Eleonora Rosati
e.rosati@soton.ac.uk
@eLAWnora
SECOND-HAND MARKETS FOR DIGITAL COPIES:
AN EU COPYRIGHT CHIMERA?

2. What are we
speaking about?

6. Can you resell digital copies of copyright works?
If so, is this true for any type of work?

7. Contents
• The right of distribution within the EU copyright architecture
• Software Directive (Directive 2009/24)
• InfoSoc Directive (Directive 2001/29)
• The principle of exhaustion and its rationale
• Is there such thing as ‘digital exhaustion’?
• The case of computer programs: UsedSoft, C-128/11; Microsoft, C-166/15
• The (non-)case of other copyright works: Allposters, C-419/13; VOB, C-174/15
• The policy debate

8. The right of distribution
within the EU copyright architecture

9. EU harmonization
“Copyright in the EU, as is the case elsewhere, remains largely a creature of national law … Harmonisation
of copyright law in the EU has been a mixed process of partial and full harmonisation.”
AG Jääskinen
Criminal proceedings against Titus Donner, C-5/11
29 March 2012

10. Short history
• Early days of EU integration
• Internal market objective
• Removal of obstacles to free movement and competition
• End of the 1980s – 1990s
• Growth and competitiveness
• 2000s: Piecemeal intervention
• End of the 2000s: Copyright agenda revamped
• Now: Digital Single Market Strategy

11. Right of distribution: Article 4(1)(c) Software Directive
“ … [T]he exclusive rights of the rightholder … shall include the right to do or
authorise … any form of distribution to the public, including the rental, of the
original computer program or of copies thereof.”

12. Right of distribution: Article 4(1) InfoSoc Directive
“Member States shall provide for authors, in respect of the original of their
works or of copies thereof, the exclusive right to authorise or prohibit any form
of distribution to the public by sale or otherwise.”

13. What is the scope of this right?
• Broad (objective of EU directives)
• Preventive
• Applies to mere advertisement for sale (Labianca, C-516/13)

14. The principle of exhaustion and its rationale

15. • Derived from German and US laws
• Rationale: strike balance between IP protection and free movement
• Treaty of Rome and the idea of a common market
• Free movement of goods and services as primary means to achieve economic
integration
• Metro, C-78/70
• Creation of an internal area without frontiers
• Existence / exercise of IPRs: balance between IP protection and free movement of
goods
• Reference in a number of directives, including Software and InfoSoc Directives

16. Exhaustion: Article 4(2) Software Directive
“The first sale in the Community of a copy of a program by the
rightholder or with his consent shall exhaust the distribution right
within the Community of that copy, with the exception of the right
to control further rental of the program or a copy thereof.”

17. Exhaustion: Article 4(2) InfoSoc Directive
“The distribution right shall not be exhausted within the Community in respect
of the original or copies of the work, except where the first sale or other transfer
of ownership in the Community of that object is made by the rightholder or with
his consent.”

18. But:
Recital 28: “Copyright protection under this Directive includes the exclusive
right to control distribution of the work incorporated in a tangible article. The
first sale in the Community of the original of a work or copies thereof by the
rightholder or with his consent exhausts the right to control resale of that
object in the Community”
Recital 29: “The question of exhaustion does not arise in the case of services
and on-line services in particular”
Article 3(3): “The rights of communication and making available to the public
shall not be exhausted”

19. So, to have exhaustion of
the right of distribution
• There must be a ‘lawful sale’
(by rightholder or with his
consent)
• Of a copyright work or a copy
thereof
• The sale must transfer
ownership of work or copy
thereof

20. But is there
such thing as
digital exhaustion?

21. The case of
computer programs:
the UsedSoft
decision

22. UsedSoft (2012): background
• Oracle SW available for download from website
• Download + user licence
• 1 licence x 25 users
• “With the payment for services you receive, exclusively for your internal business
purposes, for an unlimited period a non-exclusive non-transferable user right free of
charge for everything that Oracle develops and makes available to you on the basis of
this agreement”
• UsedSoft markets used SW licences
• Licences acquired from Oracle customers
• UsedSoft customers not yet in possession of Oracle SW, first acquire licence and then
download SW
• If additional licences, SW copied in users’ workstations

23. CJEU response
Article 4(2) of the Software
Directive is to be interpreted
in the sense that the right of
distribution over the copy of a
computer program is
exhausted following the grant
of a licence if this can be
considered tantamount to a
sale, despite the different
contractual qualification given
by the parties.
(Confirmed in Microsoft – does not extend to
back-up copies)

24. What is a “sale”?
• Notion
• Autonomous concept of EU law (no reference to MSs in Software Directive)
• Broad
• Agreement by which a person, in return for payment, transfers to another person his
rights of ownership in an item of tangible or intangible property belonging to him
• Donwload + Oracle licence are inseparable from the point of view of acquirer, as
they are aimed at obtaining the right to use the copy for an unlimited time, following
payment of a price which is tantamount to its economic value
• Download of Oracle SW is a sale despite different nomen juris

25. The (non-)case of other copyright works
NB: here the question falls under the InfoSoc Directive

26. Is CJEU likely to extend UsedSoft to subject-matter
other than computer programs?
• CJEU in Nintendo (2014): “Directive 2009/24 constitutes a lex specialis in
relation to Directive 2001/29 … [T]he protection offered by Directive 2009/24
is limited to computer programs.”
• Commission in leaked White Paper (2014): premature to address digital
exhaustion
• Uncertainties also in the US as regards best reform options
• Speaking of the US: first sale doctrine and ReDigi case (2013) – no digital exhaustion
• Court of Appeal of Hamm (2014): no digital exhaustion under InfoSoc Directive
(2014 case concerning audiobooks)
• District Court of Amsterdam (2014): UsedSoft principles applicable to second-
hand ebooks

27. Allposters (2015)
• Unauthorised making and selling of altered versions of works (transfer of posters on
canvas)
• Could this reproduction be considered OK because of exhaustion of the right of
distribution?
• Recital 28
“Copyright protection under this Directive includes the exclusive right to control
distribution of the work incorporated in a tangible article. The first sale in the Community
of the original of a work or copies thereof by the rightholder or with his consent exhausts
the right to control resale of that object in the Community”
• Recital 29
“The question of exhaustion does not arise in the case of services and on-line services in
particular”
• Agreed statements Article 6 WCT: only tangible copies

28. CJEU response
• AG Cruz Villalón: right of distribution can be only exhausted in relation to
tangible support (corpus mechanicum) of a work
• “[T]he EU legislature, by using the terms ‘tangible article’ and ‘that object’,
wished to give authors control over the initial marketing in the European Union
of each tangible object incorporating their intellectual creation … [I]t should be
found that exhaustion of the distribution right applies to the tangible object
into which a protected work or its copy is incorporated if it has been placed
onto the market with the copyright holder’s consent."

29. VOB (2016)
• AG Szpunar: Allposters did not go there
• But cf CJEU
• “The Court has already held that forms of exploitation of a protected work, such as
public lending, are different in nature from a sale or any other lawful form of
distribution, since the lending right remains one of the prerogatives of the author
notwithstanding the sale of the physical medium containing the work. Consequently,
the lending right is not exhausted by the sale or any other act of distribution, whereas
the distribution right may be exhausted, but only and specifically upon the first sale in
the European Union by the rightholder or with his consent”

30. The policy debate

32. Something to think about … in conclusion
• Are all copies created
the same?
• Degradation
• Avoiding exhaustion
• Does exaustion
matter?
• From ‘ownership’ to
access
• IFPI Global Music
Report 2017

33. Thanks for your attention!
eleonora@e-lawnora.com
@eLAWnora